Tuesday, September 20, 2011

I Told You So: President Obama to Use Veto Pen to Force Congress' Hand on Revenue

When on August 1, I wrote that the debt limit deal was an unvarnished win for the President and called out Paul Krugman for being a political rookie, TPV got acclaims good and ill - Stephanie Miller picked up and read the piece live on her radio show approvingly, Huff-and-Puff Post and Keith Olbermann were very upset at our establishment of the phrase "firebagger Lefty blogosphere" to describe the knee-jerk pretend-Leftists, and ABC News did a rather factual story about the controversy.

At that time, I told you that the president, by taking social security, programs for the poor and students, and Medicare and Medicaid benefits off the table, would force the 'supercommittee' to come up with revenue increases; with the threat of the Bush tax cuts expiring at the end of 2012. I told you at the time that the president would use his veto pen to force Congress' hands.

Well, guess what just happened...

President Obama called on Monday for Congress to adopt his “balanced” plan combining entitlement cuts, tax increases and war savings to reduce the federal deficit by more than $3 trillion over the next 10 years, and said he would veto any approach that relied solely on spending reductions to address the fiscal shortfall.

“I will not support any plan that puts all the burden for closing our deficit on ordinary Americans,” he said. “And I will veto any bill that changes benefits for those who rely on Medicare but does not raise serious revenues by asking the wealthiest Americans and biggest corporations to pay their fair share.

Here's the Presidents speech today at the Rose Garden outlining the plan:

I feel like going to the Firebagger Lefty Blogsphere and doing the "told you so" dance. But first, I will wear my nerdy wonk hat and see what the president is actually proposing in his plan to both reduce the budget deficit and pay for the American Jobs Act. President Obama is proposing about $3 trillion in deficit reductions (far above and beyond the Congressional supercommittee's mandate of $1.5 trillion) over the next decade:

•$1.5 trillion in tax revenue increases.•$1.1 trillion in savings from winding down the wars in Iraq and Afghanistan.•$580 billion in savings to entitlements, including Medicaid, Medicare, the VA and other health and entitlement programs (there are no benefit cuts).There are a lot of other savings, which I will cover in a detailed post later. Of the $1.5 trillion in tax revenue increases, $800 billion would come from letting the high-end Bush tax cuts expire and $700 billion from limiting itemized deductions for that same tax bracket (top 2% of income earners) and closing down corporate and individual tax loopholes that riddle the tax code and serve as a welfare system for the uber-rich. It would also include something called the Buffet-rule, imposing a minimum tax rate on millionaires, ensuring they pay at least the same tax rate as the middle class, which we all know today they don't.

Before anyone on the Left freaks out about the Medicare savings, the detailed plan from the president lays out no cuts in benefits, nor does it raise the Medicare eligibility age. So where do the savings come from? $224 billion over 10 years from by providing payment incentives based on quality of care rather than number of scans for patients, $24 billion from reducing subsidies to wealthy beneficiaries and $20 billion from raising part B and D premiums on the same group, cutting $20 billion in subsidies to hospitals, several other structural, patient-centric reforms as well as cutting waste, fraud and abuse. Essentially, it follows pretty closely with the reform outlines I pointed out in an earlier article over the Medicare freakouts from the Left.

The president's move is both substantively productive and politically genius. The President is going to get tax revenue increases, one way or another. Either Congress follows his plan, or reforms the tax code as a whole, making it fairer. Or, the president vetoes the bill (IF it can get out of both houses), and the additional cuts included in the debt deal ensue in 2013, the same time as the Bush tax cuts expire (yes, for everyone). Republicans can force this to be an election issue, but if they do, they will lose. President Obama will hold up a choice to voters: re-elect him and elect a Democratic Congress, who will prevent the middle class tax raisers (and some of the cuts) and replace it with revenue in the next Congress, or elect the Republicans who will devastate our social compact.

John Boehner must be breaking into tears right about now. During the debt ceiling talks, the President offered him $4 trillion in deficit reductions, ranging from a 3:1 to a 60:40 ratio of cuts vs revenue increases. Look at it now, and the actual ratio of cuts vs. revenue increases that the president is offering is about 1:3, given that the wars would wind down anyway. Even if you include the $1 trillion in cuts made in the debt limit bill, the ratio is still half and half cuts and tax revenue raisers. On top of it, Boehner's got a veto threat from the president, which, if materialized, would mean over a half a trillion cut from the Republican darling program of Defense (ahem, actually, probably defense contracting) and from other programs including the provider side of Medicare, who, as I noted in my piece in August, donate mostly to Republicans. Can you imagine the lobbyist pressure on Boehner right now? Poor bastard.

Republicans are going to have a choice. Do they want to face the wrath of the VA and the Pentagon by forcing cuts, or do they brush off the Tea Party and do what is right and include revenue raisers? As the president said, it's not class warfare; it's math.

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"The two parties have combined against us to nullify our power by a ‘gentleman's agreement' of non-recognition, no matter how we vote ... May God write us down as asses if ever again we are found putting our trust in either the Republican or the Democratic Parties." -- W.E.B. DuBois (1922)